U.S. Hammers Credit Suisse – Bank Pleads Guilty in Criminal Tax Case

Credit Suisse Agrees to Pay $2.6 Billion to Settle Probe by U.S. Justice Department

Credit Suisse Group AG became the first financial institution in more than a decade to plead guilty to a crime on May 19, 2014 when the Swiss bank admitted it conspired to aid tax evasion and agreed to pay $2.6 billion to settle a long-running probe by the U.S. Justice Department.

Attorney General Eric Holder, in announcing the charges, said the bank engaged in an “extensive and wide-ranging” scheme to help U.S. taxpayers hide assets.

The criminal charge filed Monday in federal court outlined a decades-long, concerted attempt by Credit Suisse to “knowingly and willfully” help thousands of U.S. clients open accounts and conceal their “assets and income from the IRS.” Mr. Holder said the bank destroyed account records sent to the U.S. for client review, concealed transactions and “failed to take even the most basic steps to ensure compliance with tax laws.”

Even after a U.S. crackdown on Swiss accounts in 2008 led Credit Suisse and rival UBS AG to tighten restrictions on the kinds of services they would provide to American customers, they continued to take steps that hindered investigators, the filing said. Credit Suisse didn’t conduct a thorough inventory of the accounts its managers oversaw, and some managers helped clients move their assets to other offshore banks so they would remain hidden to the U.S., according to the filing.

When it became clear in 2010 that the Justice Department was investigating the bank’s conduct, Mr. Holder said Credit Suisse “failed to retain key documents, allowed evidence to be lost or destroyed, and conducted an inadequate internal inquiry.”

“This conspiracy spanned decades,” Mr. Holder said. “Credit Suisse not only knew about this illegal, cross-border banking activity; they willfully aided and abetted it. Hundreds of Credit Suisse employees, including at the manager level, conspired to help tax cheats dodge U.S. taxes.”

Prosecutors have also charged eight former Credit Suisse employees with helping aid tax evasion.

The financial terms of the settlement include a $100 million payment to the Federal Reserve, more than $715 million to the New York Department of Financial Services, and about $1.8 billion to the Justice Department. Credit Suisse already has set aside more than $800 million, or about a third of the total settlement, to deal with the issue.

In addition Credit Suisse is handing over information that Deputy Attorney General James Cole said would lead to the IRS identifying specific non-compliant U.S. account holders.

The settlement marks the Justice Department’s biggest victory in its crackdown on tax evasion since UBS agreed to pay $780 million as part of a deferred-prosecution agreement in 2009. As part of that deal, UBS acknowledged aiding U.S. tax evasion but didn’t plead guilty.

Still, Credit Suisse’s relationships with its clients and partners may take a hit. Many pension and mutual funds have guidelines that prevent them from dealing with institutions that have pleaded guilty to criminal charges.

With big wins by the U.S. against UBS and Credit Suisse, the momentum to break Swiss Bank Secrecy Laws that historically fostered tax evasion grows stronger. Roughly a dozen Swiss banks are still subjects of criminal investigations by U.S. authorities and all of Switzerland’s 106 banks are taking part in a self-reporting program run by the U.S. Justice Department.

In response to a government crackdown on Americans hiding money overseas, more than 43,000 taxpayers joined a voluntary Internal Revenue Service disclosure program to acknowledge previously unknown accounts. The IRS estimates that Credit Suisse had more than 22,000 U.S. customers with Swiss accounts Although it is not clear how many of those were hidden from the IRS, a Congressional panel has concluded that Credit Suisse actively recruited Americans to open secret Swiss accounts.

Don’t think that only Swiss banks are being targeted. Federal prosecutors also are negotiating a multibillion-dollar settlement with French bank BNP Paribas to end an investigation into alleged evasion of sanctions.

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